Obama, in new debt proposal, won’t put Social Security cuts back on the table

September 15, 2011

The last time President Obama negotiated with Republicans about overhauling the nation’s social safety net, he put several significant and politically explosive proposals on the table.

This time, it will be different.

As Obama prepares to present Congress on Monday with a detailed plan for taming the nation’s debt, a pivotal question has been whether he will again propose raising the Medicare eligibility age from 65 to 67 and propose cuts in Social Security benefits.

Over the objections of members of his party, the president agreed to those changes as part of an unsuccessful effort to strike a debt deal earlier this summer with House Speaker John A. Boehner (R-Ohio). But Obama has decided not to include the Social Security proposal. “As the president has consistently said, he does not believe that Social Security is a driver of our near- and medium-term deficits,” said White House spokeswoman Amy Brundage.

People close to the White House say advisers have been debating whether to include a change in the eligibility age. It was not clear Thursday whether a decision had been made.

The White House plan is likely to call for at least $340 billion in savings from Medicare and Medicaid, the low-income health insurance program, as part of a detailed proposal to overhaul entitlements.

The plan is also likely to call for at least $800 billion in tax increases and, according to a person familiar with the matter, include principles for redrawing the personal and corporate tax codes. Obama may also call for scaling back farm subsidies and requiring bigger contributions to civil pensions by federal employees.

Aides say the president’s plan will be modeled after a series of proposals he made in April amid pressure from Republicans to show he was serious about curbing the growth of the nation’s debt.

Those proposals called for $4 trillion in budget savings over 12 years, through a combination of spending cuts and tax increases. But it did not touch Democratic third rails such as Social Security benefits or the Medicare eligibility age.

The new plan is to be submitted to a special bipartisan congressional “supercommittee” that has been tasked with finding at least $1.2 trillion in budget savings by the end of the year.

This week, Obama asked the congressional panel to find an additional $450 billion in savings to pay for the economic stimulus plan he announced Sept. 8.

Separately, a group of roughly 36 Democratic and Republican senators held a news conference Thursday to urge the special panel to find far more savings than the $1.5 trillion target it has set. The group of senators is also considering making its own proposal.

If Obama were to propose increasing the Medicare eligibility age, it would challenge Democratic Party orthodoxy.

Rep. Sander M. Levin (Mich.), the top Democrat on the House Ways and Means Committee, said he would prefer for the president not to adjust the eligibility age.

“It would increase the number of uninsured,” Levin said.

Under the terms of the proposed deal with Boehner this summer, the Medicare eligibility age would have increased in phases over many years and Social Security changes would not have applied to low-income retirees.

Senior administration officials said this week that Obama had demonstrated his willingness to rein in the nation’s debt by making significant compromises during the negotiations with Boehner.

The talks with Boehner were held against the backdrop of a possible government default. Republicans and some Democrats in Congress had threatened not to raise the federal debt ceiling unless there was agreement on cutting the government budget deficit.

Sen. Christopher A. Coons (D-Del.), a member of the Budget Committee, said Obama would face less need to give ground on popular entitlements, because there is no longer the prospect of an imminent default. “Without a critical short-term deadline, I do think there’s some room to engage the broader American public about where to cut,” Coons said.

In his April speech about deficit reduction, Obama proposed generating most of the health-care savings several ways, namely by building on measures included in his expansion of health-care insurance and negotiating lower prices for prescription drugs.

The proposed deal with Boehner went further and included substantial cuts in benefits. The deal would have sliced $250 billion in Medicare spending by raising the eligibility age, increasing patient premiums on prescription drugs and doctor care and limiting payments to providers. Up to $150 billion more would have been cut from Medicaid.

For the White House to sign off on such dramatic steps now, Republicans would have to accept the kind of tax increases that were discussed with Boehner, according to Jared Bernstein, a former economic adviser to Vice President Biden.

“The only reason to accept any cuts in entitlements is in exchange for substantial revenues, something on the order of dollar for dollar. Otherwise, I don’t see anything ‘grand’ about such a bargain,” said Bernstein, now a senior fellow at the Center on Budget and Policy Priorities. “Furthermore, any such cuts should emphasize cost savings, not benefit cuts. So ‘yes’ on negotiating lower drug costs in Medicare, ‘no’ on raising the eligibility age.”

Staff writers Lori Montgomery and Peter Wallsten contributed to this report.

Zachary A. Goldfarb is a staff writer covering the White House, focusing on President Obama’s economic, financial and fiscal policy.
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